Asian Market Update: AUD rallies as RBA minutes show central bank on the fence about last cut; Abe defers decision on sales tax hike
***Economic Data***
- (NZ) NEW ZEALAND Q2 2-YEAR INFLATION EXPECTATION SURVEY Q/Q: 1.64% V 1.63% PRIOR
- (AU) AUSTRALIA APR NEW MOTOR VEHICLE SALES M/M: -2.5% v 2.2% PRIOR; Y/Y: +2.4% v 4.2% PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.1 v 113.9 prior
- (SG) SINGAPORE APR ELECTRONIC EXPORTS Y/Y: -7.4% V -5.8%E; NON-OIL DOMESTIC EXPORTS M/M: 4.5% v 4.4%E; Y/Y: -7.9% V -8.4%E
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +0.9%, S&P/ASX +0.7%, Kospi -0.1%, Shanghai Composite -0.4%, Hang Seng +0.3%, Jun S&P500 flat at 2,061
***Commodities/Fixed Income***
- June gold +0.4% at $1,279/oz, June crude oil +1.0% at $48.19/brl, Jul copper +0.2% at $2.09/lb
- (CA) Alberta, Canada fire officials: Wildfire burning 15-20km south of Oil Sand facilities - financial press
- JGB: (JP) Japan MoF sells ¥2.18T in 0.1% (0.1% prior) 5-year JGBs; Avg yield: -0.225% v -0.226% prior; Bid-to-cover: 4.15x v 4.36x prior
- (CN) PBOC SETS YUAN MID POINT AT 6.5200 V 6.5343 PRIOR; First stronger Yuan setting in 3 days
- (CN) PBOC to inject CNY50B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equity markets march higher for the 2nd straight session, tracking the rally on Wall St and continued strength in the oil patch. WTI is up another 1% in electronic session to top $48/brl with Canadian wildfires reported to draw as close at 20km from the Oil Sands facilities, forcing evacuation of large number of workers while adding to supply concerns. In FX majors, AUD/USD is most active with an 80pip spike after less dovish than expected RBA meeting minutes. GBP/USD also saw a notable 90pip jump toward $1.45, with the latest Telegraph poll showing a widening support for UK to remain in the EU at 55% vs 40% in favor of Brexit. USD/JPY traded in a 20pips range around ¥109.
- After this month's surprise rate cut to record low 1.75% due to low inflation and slower global growth, RBA meeting minutes revealed the decision to be a very close call, as members also considered awaiting more data before acting. Minutes indicated that there has not been a material change in the outlook for economic activity or the unemployment rate, but the outlook for inflation had been revised lower. RBA was also optimistic that China policy support would address that economy's slowdown. The yield on Australia's 3-year bond rose over 3bps to a 1-week low, AUD/USD spiked up above $0.7360, and S&P/ASX slightly pared its opening gains.
- Also of note down under, New Zealand's 2-year inflation expectations remained around the 22-year low just above 1.63%, but 1-year expectations rose to 1.22% v 1.09% prior. Still, NZD/USD came in 25pips on the release toward $0.68, as RBNZ survey also revised its forecast for end of quarter 90-day bill rate to 2.27% v 2.62% prior - a material decline suggesting expectations for more easing.
- Japan govt also straddled both sides of the fence regarding recent Nikkei speculation about a delay to the sales tax hike. Econ Min Ishihara noted the rumors were not true, and no special instructions from PM Abe were received. To that end, Abe said the decision would be made at a appropriate time after consultation with experts, though he was still leaning in favor of the increase unless there is a "serious event" in the economy.
- Among notable Chinese press reports, Stats Bureau official said industrial economy and fixed asset investment growth will be stable. Separately, govt was reportedly planning to announce new rules on stock trading halts as soon as next week, making it difficult for companies to pose as though M&A activity is in the works only to drive up the stock price.
***Equities***
US equities / ADRs:
- AYA: Reports Q1 $0.43 v $0.36e, R$288.7M v $277Me; review of strategic alternatives remains ongoing; +11.0% afterhours
- A: Reports Q2 $0.44 v $0.39e, R$1.02B v $989Me; +3.6% afterhours
- P: Shareholder Corvex Management held talks with company and 3rd parties about strategic options - financial press; +3.5% afterhours
- WNRL: Announces 3.8M offering of common units (15% of shares outstanding); -5.8% afterhours
- RLYP: Discusses Veltassa prescription trends - filing; -6.6% afterhours
- CLX: Raises dividend 4% to $0.80 from $0.77 (implied yield 2.4%)
Notable movers by sector:
- Consumer discretionary: Air China 753.HK +2.0% (Apr result); Lotte Confectionery 004990.KR -89.4% (stock split); Dentsu 4324.JP -0.7% (Q1 result, cuts guidance); Morinaga Milk Industry Co. 2264.JP +0.5% (FY15/16 result); Dulux Group DLX.AU -2.6% (H1 result)
- Financials: Mitsubishi UFJ Financial Group 8306.JP +1.1% (FY15/16 result, share buyback); Sony Financial 8729.JP -4.4% (FY15/16 result); Mitsubishi UFJ Lease & Finance Co 8593.JP -0.4% (FY15/16 result); OzForex Group OFX.AU -3.5% (FY16 result); ANZ Bank ANZ.AU +0.7% (job cut speculation)
- Industrials: Japan Steel Works 5631.JP -7.0% (FY15/16 result); Hyundai Merchant 011200.KR +6.6% (Q1 result)
- Technology: Kyocera Corp 6971.JP -0.1% (merger speculation)
- Energy: Infigen Energy IFN.AU +2.6% (to explore strategic options)
- Materials: Posco 005490.KR -2.9% (Nippon Steel to sell stake in Posco)